Petra sticks to its guns saying diamond boom intact despite global turmoil

Rough diamonds sit on a sorting table during the grading process.

PETRA Diamonds CEO Richard Duffy is maintaining his optimistic outlook on diamond market conditions despite the current macro-economic turmoil caused by the war in Ukraine and the impact of China’s hard-line Covid lockdown policy.

This was despite a hiccup in the group’s second sales tender for 2023 caused by “unusual market conditions with some build-up in inventory pre-Diwali”.

Petra has extended the closing for the second sales tender for a portion of its gem and near-gem quality goods, particularly in plus 1 carat to 5 carat size ranges.

Duffy added: “Pricing in other size categories are in line with expectations. We will confirm the sales results for this tender around mid-November. This extension is not currently expected to have any impact on the closing of our third sales tender.”

In an operating update issued today for the first quarter of the group’s 2023 financial year Duffy said Petra was maintaining its production guidance for the year “although we expect this will be toward the lower end of the range for Cullinan mine and Finsch”.

In February this year Duffy told investors that the diamond market had undergone a “structural change where the long-predicted supply squeeze is being reflected over all the diamond categories”.

He added there was “very strong demand pull into an inventory pipeline where inventories are largely depleted and the ability of suppliers to provide inventory to the market is very low.

“This is important because it is a structural change – not a bubble or a blip – and it is supported by supply/demand fundamentals. This suggests we will have a robust and supportive market going forward”.

Duffy today stuck to his guns, saying “The backdrop of structural changes to the supply and demand fundamentals in the diamond market remains unchanged and we anticipate it to remain supportive going forward, although we expect  some short-term volatility driven largely by the on-going lockdowns in China”.

Petra produced 733,014 carats of ROM (run of mine) diamonds in the quarter to end September 2022 which compares with 717,373 carats for the June 2022 quarter quarter and 810,346 carats for the September 2021 quarter.

Duffy said Petra had been unable to find a buyer for the Koffiefontein mine which was put up for sale in April this year and, replying to questions on a conference call, commented  “there were no offers made to purchase the operation”.

He said Petra was now “exploring alternative options in close consultation with its stakeholders” on which he declined to provide details.

“There is now a process we need to follow negotiating with stakeholders. We will be looking to reduce the cash outflow from that operation and do that in a responsible manner.”

“I do not want to front run that process because there is engagement underway with the regulatory authorities as well as organised labour. We will keep you updated as we progress,” he said.